Which of the Following Statements Is Correct About the Reinvestment

Multiple Choice

Which of the following statements is correct about the reinvestment assumptions that are inherent in the use of the net present value (NPV) method and the internal rate of return (IRR) method?

A) The NPV method assumes that the project's cash flows will be reinvested at the firm's required rate of return, whereas the IRR method assumes reinvestment at the project's IRR.
B) The NPV method assumes that the project's cash flows will be reinvested at the risk-free rate, whereas the IRR method assumes reinvestment at the firm's required rate of return.
C) The NPV method assumes that the project's cash flows will be reinvested at the firm's required rate of return, whereas the IRR method assumes reinvestment at the risk-free rate.
D) The NPV method assumes that the project's cash flows are not reinvested, whereas the IRR method assumes the cash flows are reinvested at the firm's required rate of return.
E) The NPV method assumes that the project's cash flows are reinvested at the firm's required rate of return, whereas the IRR method assumes the cash flows are not reinvested.